Weekly Coffee News: South America

General News

The last few months have been characterized by almost surreal news. Reports of the latest technological achievements, such as Elon Musk's Tesla robotaxi, stand alongside exploding pagers and walkie-talkies in Lebanon.? Reports on the fighting in Ukraine, Gaza, and Lebanon continue to shake us and question our capacity for human compromise. Five years ago, almost 1,500,000 people took to the streets in Germany to demonstrate for climate protection. This year, after the disasters in the Ahr Valley, the floods on the Oder and Danube in Poland, the Czech Republic, and Hungary, the major forest fires in Greece and Canada, and the hurricanes in the USA, only 75,000 demonstrated on the streets.?

The world is sorting itself out. Who will be the new world power? The USA is being massively challenged by China. India and other emerging countries also want their place in the sun. Europe is ossified in bureaucracy and lacks ideas, appearing old, rickety, and lacking in fighting spirit. The transition from the industrial to the digital age has long since begun, and the most valuable companies are no longer traditional industrial enterprises, but software companies and IT firms. Productivity as an indicator of innovation and performance has continued to fall in the traditional industrial sectors over the last few decades. The response of economists to the declining productivity of the G7 nations always seems to be the same: Jerome Powell, head of the US Federal Reserve, is already discussing with his staff whether further interest rate cuts will follow. The President of the European Central Bank, Christine Lagarde, also gives the impression that further interest rate cuts could be on the cards in two weeks' time. However, it has been proven in the past that cheap money has not really led to increased productivity, but primarily to more consumption. Prosperous nations are those whose productivity is higher than their consumption, meaning that today's economic policy decisions will weaken rather than strengthen us in the long term. This already bad situation can be exacerbated by arbitrary paralysis. But it is precisely here that the European Union seems to have a special talent. Ineffective bureaucratic bombs like the EUDR not only overburden the legislators themselves but above all, the taxpaying companies and offend sovereign non-European nations.?

Following considerable pressure from the USA and China, the EU Commission has now finally recognized this and submitted a proposal to Parliament and the member states to postpone the entry into force of the EUDR by 12 months. As the effectiveness of this law is by no means proven and can therefore be doubted, it would be surprising if the complete deletion of the law wouldn't be the better alternative. At best, anti-deforestation means maintaining the status quo. Reforestation, on the other hand, could even improve the situation in the long term. This could, however, be promoted with existing (and functioning) project concepts and flanked by appropriate tax breaks. Incentives instead of punishment would place sustainability back in the right light.

This EUDR communication—together with some rain in Brazil ;-)—caused the Arabica coffee market (KCZ24) to fall by a whopping 4.4% last week, closing at 257.35 c/lb on Friday. Robusta (RMX24) was also unable to escape this trend and closed 7.6% lower at USD 5,067/MT.?

Further price information can be found in the attached weekly tables.

Origin News

Brazil

Brazil's primary focus continues to be the weather. The country is currently in its worst drought since the 1950s, with the Amazon River plunging to record-low levels. According to Cemaden, Brazil's Natural Disaster Monitoring Center, the drought is affecting nearly 60% of the country, including coffee-producing regions.

After a five-month drought, light rains have finally arrived, reaching coffee areas. While the rainfall has been enough to stimulate some flowering on trees, concerns remain, as consistent rainfall in the coming weeks will be crucial for the optimal development of cherries. Forecasts indicate that rain will continue this week. For now, all we can do is hope the rain brings enough moisture to replenish the soil, trigger adequate flowering, and help mitigate the drought's impact on the upcoming 2025/2026 crop.

Market prices in Brazil have been susceptible to weather concerns. Local prices remain firm, with Conilon some points in which Conilon (aka Robusta) prices have surpassed those of Arabica. Producers are well-capitalized and are not in a rush to sell. In contrast, traders are highly active, closely monitoring market movements and currency fluctuations.

Challenges persist in Santos' port operations due to container shortages and delays.

Colombia?

Similar to Brazil, Colombia has also been impacted by a lack of rain. In Bogotá, the government has again implemented a daily water rationing system to help preserve water reserves. The warm and dry conditions have also led to fires across Tolima, Huila, Cauca, Nari?o, and other regions.

On the coffee front, the main harvest is picking up pace in areas such as Huila, Valle del Cauca, Quindío, Risaralda, and Antioquia. As October progresses, parchment availability is expected to increase. In Cauca, Nari?o, and Tolima, the mitaca crop is about to commence, and the outlook for both harvests is promising. According to the Federación Nacional de Cafeteros (FNC), the year is projected to close with 13 million bags.

Regarding logistics, the truck driver strikes ("paro camionero") have concluded following an agreement with the government. There are no significant updates from the ports of Buenaventura and Cartagena.

Peru

Former Peruvian President Alberto Fujimori recently passed away at the age of 86. He governed Peru from 1990 to 2000 before being removed from office due to corruption allegations. Fujimori was convicted of human rights abuses and corruption, spending over 15 years in prison. He was released in 2023 and died after a long battle with cancer in early September.

On the weather note, Peru is also being affected by the severe drought. Recently, Peruvian President Dina Boluarte declared a state of emergency in the northern areas of Amazonas, San Martin, and Ucayali due to devastating first fires. The fires are largely attributed to the lack of rain and the burning of dry grasslands to expand agricultural lands.?

In the last six months, Peru has experienced high temperatures and a lack of rain, contributing not only to the fires but also to water shortages. In coffee-growing areas, the effects are similarly adverse, as plant health is compromised due to water stress. Rain is finally forecasted for regions such as San Martin and Cajamarca. Moving south to Cusco and Puno, conditions are expected to remain dry but much cooler than in the northern areas.

The harvest has approached its final stage. Most activity is taking place at the dry mills, where coffees are still being hulled, screened, sorted, cupped, and prepared for export.

No significant news coming from the ports of Callao and Paita?